Taxpayers Alert: Meet the Madoff Pentagon, A Money-Burning Machine

Think of the Pentagon, and you think of security, right? Think again. The Pentagon may just be the U.S. taxpayers' Bernie Madoff. It's the biggest drag on the economy, and the reason is not because we need what it burns money on. The reason is not that the "world is a dangerous place" and we need "protection", and protection costs what it costs. We need what the Pentagon is paying our lifeblood and treasure on less than we need a huge Ponzi scheme to keep our economy from totally tanking. Chalmers Johnson at Tomdispatch really turned the world inside-out on this one.

Worried about pork-barrel spending? Maybe you should worry about the defense budget.

Given our economic crisis, the estimated trillion dollars we spend each year on the military and its weaponry is simply unsustainable. Even if present fiscal constraints no longer existed, we would still have misspent too much of our tax revenues on too few, overly expensive, overly complex weapons systems that leave us ill-prepared to defend the country in a real military emergency. We face a double crisis at the Pentagon: we can no longer afford the pretense of being the Earth's sole superpower, and we cannot afford to perpetuate a system in which the military-industrial complex makes its fortune off inferior, poorly designed weapons.

A trillion a year? On what? Oh, those wonderful, wonderful wars and their flying machines.

It is hard to imagine any sector of the American economy more driven by ideology, delusion, and propaganda than the armed services. Many people believe that our military is the largest, best equipped, and most invincible among the world's armed forces. None of these things is true, but our military is, without a doubt, the most expensive to maintain. Each year, we Americans account for nearly half of all global military spending, an amount larger than the next 45 nations together spend on their militaries annually.

Equally striking, the military seems increasingly ill-adapted to the types of wars that Pentagon strategists agree the United States is most likely to fight in the future, and is, in fact, already fighting in Afghanistan -- insurgencies led by non-state actors. While the Department of Defense produces weaponry meant for such wars, it is also squandering staggering levels of defense appropriations on aircraft, ships, and futuristic weapons systems that fascinate generals and admirals, and are beloved by military contractors mainly because their complexity runs up their cost to astronomical levels.

That most of these will actually prove irrelevant to the world in which we live matters not a whit to their makers or purchasers. Thought of another way, the stressed out American taxpayer, already supporting two disastrous wars and the weapons systems that go with them, is also paying good money for weapons that are meant for fantasy wars, for wars that will only be fought in the battlescapes and war-gaming imaginations of Defense Department "planners."

So we've got an economy about to go over a cliff, and yet we spend billions on weapons systems that we will never use, to satisfy the fantasies of admirals and generals and other military-related beneficiaries? Well...yes.

So when we talk about "stimulating" the economy, maybe we should talk about cutting spending and cutting pork. Not birth control-type nickel-&-dime pork. Big, lousy, wasteful, useless, dead-weight, sink-the-national-treasury Pentagon pork.

It has nothing to do with security, but everything to do with procurement and the good ol' boy system. Oh, and PR. Lots of lies and PR. Is that really "conservative"? Sounds very very liberal to me - as in "use liberally".

What do people struggling to make ends meet need with a 6.2-billion dollar aircraft carrier designed to fight the Cold War? It was probably commissioned, like the one named in 2009 for Bush I, to pat some old political hack/warrior on the back with his outdated dream. And we put people in prison for not paying a few thousand in self-employment taxes (which are required for anyone with over $400 in income - like he can afford to pay taxes on $400! - talk about preference for the big corporation!).

It's time to think twice about those "guaranteed" Pentagon budgets, to think twice when you think that paying for anything labeled "military" means you'll be more secure. The opposite is true. By paying for way overpriced, outdated equipment, we are sinking the whole country ... and none of those fancy flying machines, etc., will be able to lift one square mile of us out of that sinkhole.

Taxpayers, unite! Screw the Pentagon, and tell your Congresspeople they'll have to think before they spend.

Naomi Klein: Economic Crisis Part of Shock Doctrine

Although this was a long time comin', Klein's point is that the sudden, extreme, shocking, and Totally Now Emergency way the bailout went down is part of the Shock Doctrine she speaks about in her book.

When Is Money Not Money? When It Is a Ponzi Scheme

So you think you understand finance? Do you think anybody understands finance? Does the Secretary of the Treasury understand finance? Well...according to this website:

Our money system is not what we have been led to believe. The creation of money has been "privatized," or taken over by a private money cartel. Except for coins, all of our money is now created as loans advanced by private banking institutions — including the private Federal Reserve. Banks create the principal but not the interest to service their loans. To find the interest, new loans must continually be taken out, expanding the money supply, inflating prices — and robbing you of the value of your money.

Could this be what's behind the whole economic collapse we're now trying to dig ourselves out of by selling bad debts to China? And would that then rob the Chinese of the value of their money?

Not only is virtually the entire money supply created privately by banks, but a mere handful of very big banks is responsible for a massive investment scheme known as "derivatives," which now tallies in at hundreds of trillions of dollars. The banking system has been contrived so that these big banks always get bailed out by the taxpayers from their risky ventures, but the scheme has reached its mathematical limits. There isn't enough money in the entire global economy to bail out the banks from a massive derivatives default today. When the investors realize that the "insurance" against catastrophe that they have purchased in the form of derivatives is worthless, they are liable to jump ship and bring the whole shaky edifice crashing down.

But Fareed Zakaria says China CAN bail out this system. If not, what exactly does "the whole shaky edifice crashing down" look like?

This article suggests that what has happened is nothing less than "The Collapse of a 300 Year Ponzi Scheme".

All the king’s men cannot put the private banking system together again, for the simple reason that it is a Ponzi scheme that has reached its mathematical limits. A Ponzi scheme is a form of pyramid scheme in which new investors must continually be sucked in at the bottom to support the investors at the top. In this case, new borrowers must continually be sucked in to support the creditors at the top. The Wall Street Ponzi scheme is built on "fractional reserve" lending, which allows banks to create "credit" (or "debt") with accounting entries. Banks are now allowed to lend from 10 to 30 times their "reserves," essentially counterfeiting the money they lend. Over 97 percent of the U.S. money supply (M3) has been created by banks in this way. The problem is that banks create only the principal and not the interest necessary to pay back their loans. Since bank lending is essentially the only source of new money in the system, someone somewhere must continually be taking out new loans just to create enough "money" (or "credit") to service the old loans composing the money supply. This spiraling interest problem and the need to find new debtors has gone on for over 300 years -- ever since the founding of the Bank of England in 1694 – until the whole world has now become mired in debt to the bankers’ private money monopoly.

And what happens when this long-standing house of cards falls? And what will finally call their bluff? Apparently, their bluff will be called by none other than the earth itself.

As British financial analyst Chris Cook observes:

"Exponential economic growth required by the mathematics of compound interest on a money supply based on money as debt must always run up eventually against the finite nature of Earth’s resources."

So what is the solution - if any?

The parasite has finally run out of its food source. But the crisis is not in the economy itself, which is fundamentally sound – or would be with a proper credit system to oil the wheels of production. The crisis is in the banking system, which can no longer cover up the shell game it has played for three centuries with other people’s money. Fortunately, we don’t need the credit of private banks. A sovereign government can create its own.

And how can we "grow our own" banking system without becoming essentially government-run, which sounds like - thunderstorm sound effects with Halloween music, please - "socialist"?

Ask Ron Paul, maybe? Or is the Government By the People not such a horrible thing after all? At least, not as horrible as a Ponzi-Scheming Banking Cartel Not By the People.

Greenspan-Gramm's $45 trillion Fantasy Scam Becomes Self-Aware

Devilstower's great dkos diary tells the history, and intentions, behind the Wall Street/Financial debacle that has Bushco wants YOU to BAIL OUT NOW for 700 Billion Dollars, putting America in 11.7 Trillion Dollars Debt.

It's best to read the article, but just to get a sense of what's at the heartless heart of it, meet Phil Gramm and "Maestro" Alan Greenspan's financial cyborg: the name's credit default swaps.

As if bent on terminating America and its prosperity and riches altogether, Republican anti-regulationists decided to make greed the ultimate moral determinator: Greed = The American Dream. It is "Our Dream" to "Get Rich, or Die Tryin'", or better yet, let someone else die while the elite don't die, and get rich with a minimum of work (aka, "tryin'"). And John McCain's economic idol, Phil Gramm, helped author this anarchist, regulation-free debacle.

It all started with GOP icon Reagan and his voodoo economics, where the rich bilking the rest of us was supposed to result in some sort of drip-drip-drip down to... the rest of us. They de-regulated - i.e., put out into the Wild West with no laws - the Savings and Loan industry, which more or less exploded with greed and collapsed.

Then, after that debacle, Gramm & friends - notably, Alan Greenspan, American Financial Idol - worked very hard to build a totally lawless world of ever-expanding Finance, where Monsters eat Dogs, and Dogs eat Pipsqueaks, and Pipsqueaks pay taxes. And Monsters eat each other in Carnival Cannibalia, where no monster is too big to become bigger and, of course, bigger means better, right?

And in the middle of this greed, law-bashing fest was good ol' John McCain, basking in Republican elitism: grab the money, say we're defending America and the Individual. While in fact they are doing the exact opposite.

Gramm-Leach-Bliley reversed those rules, allowing not only more bank mergers, but for banks to become directly involved in the stock market, bonds, and insurance. Remember the bit about how S&Ls failed because they didn't have the regulations that protected banks? After Gramm-Leach-Bliley, banks didn't have that protection either.

Gramm wasn't done. The next year he was back with the Commodity Futures Modernization Act, which was slipped into a "must pass" spending bill on the last day of the 106th Congress. This Act greatly expanded the scope of futures trading, created new vehicles for speculation, and sheltered several investments from regulation.

As with both Gramm-Leach-Bliley and Garn-St. Germain, large parts of this bill were written by industry lobbyists. This famously included the "Enron Loophole" that exempted energy trading from regulation and was written by (big suprise) Enron Lobbyists working with Gramm. Not coincidentally, Senator Gramm, the second largest recipient of campaign contributions from Enron, was also key to legislating the deregulation of California's energy commodity trading.

Thanks to this fortunate trifecta of Gramm-crafted legislation, Enron was able to create "EnronOnline" and trade electricity in California with absolutely no oversight or transparency. They quickly worked out how to game the system. Previously, there had been only one Stage 3 rolling blackout in the history of California. Within months, the system had been manipulated by traders to generate 38 such blackouts and wholesale electrical prices had gone up more than 3000%. Despite production capacity equal to four times the demand during winter, energy traders even engineered a blackout in mid-January.

The Enron debacle, the S & L collapse, and now the meltdown of virtually everything on Wall Street - right after Republicans have changed the system to put retirement money for "ordinary Americans" - i.e., non-elite Americans - in Wall Street, all of this was engineered by Republicans Gramm and his senatorial supporters, including John McCain.

Notice that it's always propaganda selling Americans the false and misleading line: the Government is BAD because it wants to REGULATE us free & individualistic all-American Americans and we want America First!

Is that drivel or insanity? Then why do people buy this crap? Did anybody notice that all the meltdowns and disasters occurred from LACK OF REGULATION. They want to OVERREGULATE and SURVEILL YOU, the American People, while they, in their Big Elitist Superrich Protected Corporations and Agencies, go free unregulated, not subject to laws or scrutiny. They peer into your emails and underwear, while they want to fly "under the radar" while screwing you and this whole country for their own personal profit, power and fantasy ideologies.

Of these, the worst are the Credit Default Swaps.

Among those instruments which the CFMA sheltered from regulatory scrutiny was something called the "credit default swap." A kind of insurance one bank could exchange with another, credit default swaps supposedly made it safe for banks to take on ever riskier forms of debt. The Act didn't invent these swaps, though they were relatively new. Instead, by placing them in a state where they were not only unregulated but almost perfectly opaque, credit default swaps were turned into the perfect vehicle to fuel a Wall Street revolution. No one had any idea what these things were actually worth, they were traded "over the counter" without being administered by any exchange, and even the SEC could monitor their existence only indirectly.

So how did the Credit Default Swaps become self-aware???

A secondary market for trading swaps exploded into existence, and swaps were traded with absolutely no consideration for the nature or quality of the underlying investment. Swaps changed hands a dozen or more times, growing in "value" as they went. Worse still, no one regulated who could buy a swap, so it was (and is) perfectly possible for a company to acquire swaps that theoretically cover billions of dollars in loans, even if that company doesn't have a red cent on hand to cover those swaps should the loans default.

How big did this market become? Here's business correspondent Bob Moon and host Kai Ryssdal on American Public Media's Marketplace from back in the spring.

BOB MOON: OK, I'm about to unload some numbers on you here, so I'll speak slowly so you can follow this.

The value of the entire U.S. Treasuries market: $4.5 trillion.

The value of the entire mortgage market: $7 trillion.

The size of the U.S. stock market: $22 trillion.

OK, you ready?

The size of the credit default swap market last year: $45 trillion.
KAI RYSSDAL: That's a lot of money, Bob.

As in three times the whole US gross domestic product, Bob. And the truth is that Moon probably underestimated. The unregulated and poorly reported credit default swaps may have actually passed $70 trillion last year, or about $5 trillion more than the GDP of the entire world.

Look at what, of all people, Ben Stein said:

The crisis occurred (to greatly oversimplify) because the financial system allowed entities to place bets on whether or not those mortgages would ever be paid. You didn't have to own a mortgage to make the bets. These bets, called Credit Default Swaps, are complex. But in a nutshell, they allow someone to profit immensely - staggeringly - if large numbers of subprime mortgages are not paid off and go into default.

The profit can be wildly out of proportion to the real amount of defaults, because speculators can push down the price of instruments tied to the subprime mortgages far beyond what the real rates of loss have been. As I said, the profits here can be beyond imagining. (In fact, they can be so large that one might well wonder if the whole subprime fiasco was not set up just to allow speculators to profit wildly on its collapse...)

These Credit Default Swaps have been written (as insurance is written) as private contracts. There is nil government regulation of them. Who writes these policies? Banks. Investment banks. Insurance companies. They now owe the buyers of these Credit Default Swaps on junk mortgage debt trillions of dollars. It is this liability that is the bottomless pit of liability for the financial institutions of America.

Did you see that???
This is a mainstream financial analyst, Ben Stein.
So what if the whole subprime fiasco was "set up just to allow speculators to profit wildly on its collapse"?

So the Swaps themselves became real. Somebody has to pay. They got the US government in a back room, and gave them an ultimatum. Pay up, boys, or we take over.
Wonder why the entire government is jittery, paying up $700 Billion and more?
The Credit Default Swaps have become self-aware.
God help us.